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WASHINGTON - The Bush administration plans an initiative to form a group of nations to help end a strike in Venezuela that has crippled oil exports from the major oil supplier to the United States, The Washington Post reported on Friday.

The administration has generally taken a low-profile approach to the five-week strike but will unveil within a week the plan calling for the group to develop a proposal -- probably based on holding early elections -- to end the impasse in the world's No. 5 petroleum exporter.

The plan would be presented through the Organization of American States, which is mediating between leftist President Hugo Chavez and an opposition that wants him to resign, the paper reported, citing U.S. and foreign diplomatic sources.

A White House spokesman was not immediately available for comment on the report.

Washington lost credibility in Venezuela when it appeared to welcome a coup last year that briefly ousted Chavez.

But it hopes the plan will head off an initiative by left-leaning Brazil to form its own "group of friendly nations" to resolve the crisis that the United States believes would be counterproductive, the newspaper said..

The Bush administration, which had steered clear of the turmoil in the South American nation was prompted to get involved because of increasing concern about an oil shortage as it prepares for a possible war with Iraq, the Post said. Venezuela supplies about 13 percent of U.S. crude imports.

"We were getting 1.5 million barrels of oil each day and we're not getting it now," a senior State Department official told the newspaper. The official was quoted as saying that U.S. concerns had multiplied over the past week as Chavez moved to restructure the state-owned oil company.

According to the paper, the immediate aim of the U.S. initiative would be to end the strike that has battered Venezuela's economy, rattled global energy markets and stoked tensions in a divided nation.

Brazil would be part of the "Friends of Venezuela" group Washington will propose, the Post said. The other participants would be the United States, Mexico, Chile, possibly Spain and a representative of U.N. Secretary General Kofi Annan.

Venezuela's opposition, which draws on wide support from business, union and civic sectors, accuses Chavez of wanting to create a communist state and has vowed to continue their strike until he resigns or calls elections.

In the past few days, Secretary of State Colin Powell has held Venezuela talks with Mexico Foreign Minister Jorge Castaneda, Brazilian officials, Annan and OAS Secretary General Cesar Gaviria, the Post reported.

The newspaper said the talks stalled on the fundamental issue of whether, and how Chavez remains in power.

CHRISTOPHER TOOTHAKER, Associated Press Writer Friday, January 10, 2003

(01-10) 00:16 PST CARACAS, Venezuela (AP) --

Opponents of President Hugo Chavez accused the embattled leader of promoting political violence on Thursday after opposition-led marches in several cities were attacked by government supporters.

"It's the leader of the country who is provoking this violence," said Carlos Ortega, president of the Confederation of Venezuelan Workers, the nation's largest and most powerful trade union.

Government supporters attacked anti-Chavez marches in Caracas and outside oil facilities around the country, the latest incidents of political violence in this crisis-stricken South American country of 24 million.

"Chavistas," as the president's backers are called, attacked a rally outside a refinery in Cardon, 270 miles east of Caracas, wounding a 40-year-old worker and a 28-year-old demonstrator, said Luis Arends, a civil defense worker.

In Caracas, gunmen fired several shots and threw tear gas at an opposition rally. No one was hurt, and the rally resumed. There were no arrests.

Chavez supporters armed with machetes and sticks also prevented a demonstration at an oil facility in central Carabobo state, Globovision television reported. A minor clash occurred at a plant in Barinas state.

Chavez, a leftist former paratroop commander who was elected in 1998 and re-elected two years later, denies he is fomenting escalating violence. Chavez opponents claim the president's fiery rhetoric incites violent reactions from his most radical backers.

In January 2002, four supporters of Chavez' ruling party were slain in western Zulia state. Nineteen died last year on April 11, when rival marches clashed in downtown Caracas. The bloodshed spurred a coup and Chavez' brief ouster. Loyalists in the military returned him to power on April 14.

Three more citizens were killed, presumably by a lone gunman, at an opposition rallying point on Nov. 6 and two government supporters died of gunshot wounds at a street march last Friday.

Thursday's aggressions occurred as thousands of Venezuelan bank workers stayed home to support a nationwide strike seeking new presidential elections, further weakening the currency as analysts speculate that Chavez' government is running out of money.

The nationwide strike begun Dec. 2 has shut thousands of businesses and brought Venezuela's vital oil industry -- a top U.S. supplier and once the world's fifth-largest exporter -- to a virtual halt. Gasoline has been imported.

Amid fears of a banking crisis, Venezuelans bought U.S. dollars and sent the bolivar currency to a record low of 1,593 to the dollar -- 5 percent weaker than Wednesday and down 12 percent for the year.

Analysts speculated Chavez's government may have to devalue the bolivar to balance its budget. Most government income is in dollars and a weaker bolivar would increase its domestic spending power.

Spokesmen at three of Venezuela's largest banks -- Banco de Venezuela, Banco Provincial and Banesco -- said 80 percent of the country's nearly 60,000 bank employees stayed home Thursday.

Jose Torres, president of the opposition-aligned Fetrabanca workers union, urged employees to provide only minimal services -- such as processing payments for medical emergencies -- Thursday and Friday.

But Luis Boris, secretary general of the pro-government bank workers union Sutrabanca, accused bank owners of closing doors without consulting workers.

A nonbinding referendum on Chavez's rule is scheduled for Feb. 2. Chavez insists the constitution only requires him to respect a possible recall referendum in August, the midpoint of his six-year term.

Strike organizers -- including leaders of the nation's largest trade union, its business chamber and the state-run oil company -- claim their protest is as strong as ever. Many factories, industrial parks and supermarkets remained closed.

But there were signs many are tiring of the strike. There was more traffic on streets and sidewalks and in shops, restaurants and markets.

Efforts by Chavez to jump-start operations at Petroleos de Venezuela S.A., the state oil company, have been partially successful.

Crude output is estimated at about 400,000 barrels a day, compared with the pre-strike level of 3 million barrels. Exports, normally 2.5 million barrels a day, are at 500,000 barrels a day.

Energy Minister Rafael Ramirez claimed the company will produce 1.5 million barrels a day by next week and will reach full capacity next month. Dissident oil workers doubt production can reach those levels so soon.

Reuters, 01.10.03, 4:47 AM ET By Tom Ashby

VIENNA, Jan 10 (Reuters) - The United States may have a vested interest in OPEC opening up the oil taps but Washington and other industrialised powers will have to rely on the cartel's self-interest to prevent an oil price shock, analysts said on Friday.

Arab-dominated OPEC does not openly welcome U.S. calls for extra supply, but producers are expected at an emergency meeting on Sunday to raise output to stop prices going much above $30 a barrel.

"The idea that the United States can bang the table and tell OPEC or Saudi Arabia what to do is divorced from reality," said Paul Stevens, professor of petroleum policy at Britain's Dundee University.

"Having said that, it is clearly in Saudi Arabia's interest to mitigate high prices."

OPEC kingpin Saudi Arabia wants the group to lift output by as much as two million barrels per day from 23 million bpd now to cover for losses from a strike in Venezuela.

With others in OPEC unwilling to add that much, Riyadh is likely to compromise on about a 1.5 million bpd, or seven percent, addition and leave the door open to more if war breaks out in Iraq.

U.S.-Saudi diplomatic relations are still cool after the September 11 attacks, perpetrated by mostly Saudi nationals, but their mutual interest in the oil sector remains strong.

Riyadh, with the lion's share of spare capacity, has as much interest in moderating prices as the West, because previous spikes in the 1970s and during the 1990-1991 Gulf War were followed by economic downturns, hitting demand and prices.

And with several decades' worth of reserves, OPEC wants to ensure a growing market for oil against competition from natural gas and other fuel sources.

"From a purely commercial point of view, the last time prices went very high it didn't do OPEC any good," said John Mitchell, associate fellow at the Royal Institute of International Affairs.

"From a political point of view, I am sure they don't want to be seen to be just doing what the U.S. wants, but on the other hand nor do they want to create enemies."

Oil prices soared by 25 percent in the last two months to touch two-year highs at $33.60 for U.S. crude, well above OPEC's preferred range of $22-$28, because of the export halt in Venezuela and fears of further shortages in an Iraq war.

Fears are that prices could soar if a cornered Iraqi President Saddam Hussein lashes out and tries to damage oil facilities in neighbouring Kuwait and Saudi.

U.S. CONTACT The U.S. State Department said earlier this week that a substantial OPEC increase would be a "positive development".

A spokesman said officials had been in contact with some of the Organisation of the Petroleum Exporting Countries ahead of Sunday's meeting in Vienna.

The head of the U.S. Energy Information Administration said an output increase of 1.5 million bpd "would certainly make a big dent" in the shortfall from Venezuela, where a strike has reduced oil exports by about two million bpd.

"Obviously, if they want to make a big impact, (they would increase output by) more than that," said EIA Administrator Guy Caruso. Washington in 2000 made a very public plea to OPEC and Saudi Arabia in particular when oil prices last surpassed $30 per barrel, creating huge tensions in the cartel which controls two-thirds of world exports.

Iran walked out of an OPEC meeting in that year, denouncing outside interference in the group's decision making.

Since George W. Bush took the U.S. presidency, the world's biggest energy consumer has concentrated more on encouraging Western investors to lift output outside OPEC, especially in Russia, Central Asia and Africa.

Stevens said Saudi Arabia had already put its oil industry on a war footing, despite tight OPEC limits, by pumping extra oil in October and November.

This oil is still either slow-steaming in tankers towards its markets in the West or kept in storage close to markets for release in case of a crisis, he said.

Shippers and traders say Riyadh is already preparing to raise production from the end of January, with customers told to expect more crude and extra tankers on charter.

The danger is that the Venezuelan stoppage, nearly six weeks old, could require that oil before any war on Iraq starts.

U.S. Plan Seeks To End Conflict By Karen DeYoung Washington Post Staff Writer Friday, January 10, 2003; Page A01 www.washingtonpost.com

Increasingly concerned about an oil shortage as a possible war with Iraq approaches, the Bush administration has overcome its reluctance to become involved in Venezuela's escalating political conflict and is preparing a major initiative it hopes will lead to a breakthrough in deadlocked talks between the government and opposition there, according to U.S. and foreign diplomatic sources.

The U.S. initiative is centered on the formation of a group of "Friends of Venezuela," trusted by one or both sides to the conflict, that would develop and guarantee a compromise proposal, based on early Venezuelan elections presented through an existing mediation effort by the Organization of American States.

The initiative is expected to be rolled out within the next week. Its immediate goal would be an end to an opposition-organized strike, in its second month, that has paralyzed the Venezuelan economy and stopped all petroleum exports, including the 1.5 million barrels a day to the United States, about 15 percent of U.S. oil imports.

The administration also hopes to head off a budding Venezuela initiative by Brazil's new left-leaning government that it and many others in the region believe would be counterproductive, sources said. Brazil would be part of the new group, along with the United States, Mexico, Chile and possibly Spain, and a representative of U.N. Secretary General Kofi Annan.

Secretary of State Colin L. Powell has held discussions in the past few days with Mexican Foreign Minister Jorge Castaneda, as well as with Brazilian officials, Annan and OAS Secretary General Cesar Gaviria, who has been mediating talks in Caracas between the opposition and the Chavez government.

Those talks are stalled on the fundamental issue of whether, and how, Venezuelan President Hugo Chavez remains in power. Beyond outright resignation, which Chavez has rejected, the Venezuelan constitution offers two alternatives: a constitutional amendment, agreed by the legislature and approved by popular vote, for early elections; or a referendum on whether the president should stay in office, which could not be held until halfway through his term, in August. If Chavez lost, he would be replaced by his vice president and new elections -- in which Chavez could not run -- would have to be held in 30 days.

Chavez has expressed confidence he would win any new vote, and has said he would agree to the latter option. But the opposition believes August is too far off, and in any case it doesn't trust Chavez to follow through. A senior State Department official said that the administration could support either option, but wants something to be agreed to soon that would stop the strikes and street demonstrations. The U.S. hope, sources said, is that each side would have confidence in and adhere to an agreement guaranteed by the powerful new "group of friends."

Powell said in an interview Wednesday that he was working "to try to get some movement in Venezuela." But he declined to characterize his efforts beyond saying, "We're just trying to put a little more ooomph behind what Gaviria is doing."

The administration has treated the Venezuelan situation gingerly since last spring, when it was accused of reviving a long history of U.S. meddling in the region during an aborted coup attempt against Chavez. Since then, despite opposition assumptions of support, it has rigidly limited itself in public -- and largely in private -- to supporting the OAS effort, according to informed sources.

Although it basically agrees with opposition charges that Chavez, a populist former military officer, has threatened democracy and the economy and has moved the country too far to the left, the administration's concern about wider fallout from the upheaval there has overtaken its worries about Chavez's politics.

"We were getting 1.5 million barrels of oil each day, and we're not getting it now," the senior State Department official said. Concerns have multiplied over the past week as Chavez moved to fire senior oil executives and restructure the state-owned oil enterprise, the official said.

The official also said that as the strike continues and expands, widespread violence will become more likely. The official said there is concern that the situation "slips the leash" from controlled protest to violent chaos, he said. The longer it goes on, the harder it will be to put Venezuela back together, he said.

But it has been the success of the oil strike, and the recent firings and structural changes, that have changed U.S. direction, said a foreign diplomat involved in the situation. As far as the Americans are concerned, the diplomat said, the situation moved "from a problem in an important country in Latin America to a very critical matter. . . . With the war in Iraq, it became a really strategic matter."

Brazilian President Luis Inacio Lula da Silva has not yet agreed to the U.S. idea, sources said, and is awaiting a meeting he has called for Wednesday when regional leaders gather in Quito for the inauguration of the newly elected president of Ecuador.

It was at Lula's inauguration last month that Chavez announced he favored an international diplomatic effort to resolve the Venezuelan conflict, to include countries in Latin America, Europe and the Organization of Petroleum Exporting Countries, or OPEC, which Venezuela helped found more than four decades ago.

Lula appeared to agree. But much of Latin America and Gaviria consider it an attempt by Chavez to stack the deck with sympathizers and undercut the OAS. The United States immediately rejected the idea.

"We don't think there needs to be some separate group of friends formed," said State Department spokesman Richard Boucher, noting that the OAS was "uniquely positioned and equipped to address Venezuela's crisis of democracy."

Latin American sources said there is little desire to involve any government outside the hemisphere, except perhaps Spain.

At the same time, Latin American sources said, it is widely believed that any high-level intervention in the OAS effort that does not include the United States is unlikely to bring the opposition to agreement.

The U.S. initiative, sources said, is designed to add muscle to Gaviria's mediation rather than undermine it. In a brief interview yesterday by telephone from Caracas, Gaviria said he thought the idea of a "group of friends . . . is good" as long as it works within the OAS framework.

But the initiative has potential problems because of convoluted regional relationships.

Both the Bush and Lula administrations recognize their bilateral ties could be problematic and are eager not to antagonize each other. Brazil and Mexico, Latin America's two largest countries, are competitors for regional leadership. Cuba, one of the countries closest to Chavez, receives highly preferentially priced oil from his government, as do many smaller island governments in the Caribbean. All fear a solution that results in Chavez's removal might threaten those deals; together, they make up a major OAS voting bloc.

© 2003 The Washington Post Company

Motorists could see spike in fuel prices this spring By Alan Zibel - BUSINESS WRITER

California's largest gasoline suppliers are starting a changeover in gasoline formulas this week that will remove the polluting chemical MTBE but could send gas prices up to $2.50 or $3 a gallon between April and June.

The fuel additive MTBE (methyl tertiary butyl ether) is being eliminated from California gasoline because it is a suspected cancer-causing chemical that has polluted water supplies.

To meet federal gasoline standards, California refiners are replacing MTBE with ethanol, most of which comes from Midwestern corn.

Some oil companies, though, won't be making the switch until the end of the year. That means some Bay Area gas stations -- mainly independent operations without major brand names -- will be selling gasoline with MTBE this year. Other stations will use ethanol-blended fuel.

Experts say consumers should have no problems putting ethanol-blended gasoline and MTBE-blended gasoline in the same tank. A large sign proclaims Union 76 gasoline no longer contains the fuel additive MTBE.

"You would not see any performance issues or anything like that," said Wil- liam Rukeyser, assistant secretary of the California Environmental Protection Agency. "During this transition period, drivers don't have to be concerned about which one they put in, or in what order."

There is some disagreement, however, about whether pump prices will skyrocket.

David Hackett, president of the Irvine-based consulting firm Stillwater Associates, said he sees a good chance there will be a 50 to 100 percent price spike between April and June, as refiners switch from winter gasoline formulas to the summer variety.

That transition phase is when gas supplies are the tightest, he said, and the supply/demand balance is most vulnerable to refinery breakdowns.

"I hope we're wrong," Hackett said.

When gasoline is made with MTBE in California, it makes up about 11 percent of the gasoline mix, compared with 5.7 percent for ethanol.

Oil companies will have to make up the difference somewhere and don't have the capacity to produce more gasoline, especially in the summer driving season, Hackett said. He predicted that refiners will have to import gasoline from around the world, and that California gasoline imports will double to about 100,000 barrels a day.

Still, one oil analyst, Tom Kloza of the Oil Price Information Service, said ethanol might not necessarily be to blame for upcoming gasoline price spikes. Retail gasoline prices typically shoot up in the spring, as oil companies have to quickly change gasoline blends. Adding ethanol will make the switch more complicated, but it shouldn't necessarily be blamed for price spikes, he said.

"There's a period of adjustment there, (but) I wouldn't want to cast the blame on ethanol," Kloza said.

Rukeyser said that any price jump from the switchover to ethanol is probably going to be small compared to other factors such as a possible war in Iraq, and the shutdown of oil production in Venezuela.

"Ethanol is going to cause a very small ripple in an otherwise stormy sea," Rukeyser said.

Amid concern about price spikes, Gov. Gray Davis last year pushed back the state's original deadline for getting rid of MTBE by one year, to the end of 2003.

Still, oil companies BP, Shell and ExxonMobil decided to make the switch in the first half of this year. San Ramon-based ChevronTexaco, the state's second-largest seller of gasoline, said Wednesday that it will complete the transition by May in Southern California, but did not give a date for its refinery in Richmond.

Tesoro Petroleum and Valero Energy, both of which own Bay Area refineries and send much of their output to local independent gas stations, are not making the change to ethanol here until the end of the year, or sometime near then.

United Kingdom-based BP, which owns about 1,200 Arco gasoline stations in California and is the largest seller of gasoline in the state, will start delivering ethanol-blended gasoline to its stations beginning this weekend, spokesman Paul Langland said.

"It takes a while for the underground storage tanks at the stations to get rid of the MTBE and become basically all ethanol," he said.

The transition should be complete by the end of March, said Langland, who predicted a 5- to 10-cent increase in the price of gasoline due to ethanol.

Shell spokesman Cameron Smyth said his company started delivering ethanol-blended gasoline this week. Shell owns a refinery in Martinez, as well as two in Southern California. The changeover will be phased in at Shell gasoline stations around the state in the coming weeks, he said.

ConocoPhillips, which owns Union 76-branded gas stations and an oil refinery in Rodeo, already has switched over to ethanol and has been advertising MTBE-free gasoline at its stations.

Alan Zibel can be reached at azibel@angnewspapers.com (925) 416-4805.